AN IMPACT OF FINANCIAL LITERACY ON STUDENTS FINANCIAL PLANNING

BY NAMWILA CLARA

SUPERVISOR: MRS NJOBVU

STUDENT ID :
NRC NUMBER: 160971/95/1
Table of Contents
CHAPTER ONE..............................................................................................................................4

1.0 INTRODUCTION.................................................................................................................4

1.1 Background............................................................................................................................4

1.2 Problem statement..................................................................................................................6

1.3 Purpose of the study...............................................................................................................6

1.4 Main Objective.......................................................................................................................7

1.4.1 Specific Objectives........................................................................................................7

1.5 Main research question..........................................................................................................7

CHAPTER TWO.............................................................................................................................8

LITERATURE REVIEW............................................................................................................8

2.1 Introduction.......................................................................................................................8

2.2 Students understanding of financial literacy..........................................................................8

2.3. Investments.........................................................................................................................10

2.4 Financial behaviour..............................................................................................................13

2.5. Financial knowledge...........................................................................................................13

2.6 College major.......................................................................................................................14

2.7 Gender………………………………………………………………...……………………14

CHAPTER THREE.......................................................................................................................15

METHODOLOGY........................................................................................................................15

3.1 Introduction..........................................................................................................................15

3.2 Research methodology.........................................................................................................15

3.3 Research design....................................................................................................................16

3.5 Study site..............................................................................................................................16

 Figure 3.5.1 : study site/study area............................................................................................16

3.6 Target population............................................................................................................16

3.7 Sample size..........................................................................................................................16

3.8 Sampling techniques............................................................................................................17

3.9 Data collection tools.............................................................................................................17

3.10 Inclusion.............................................................................................................................18

3.11 Exclusion............................................................................................................................18

3.12 Data analysi......................................................................................................................20

3.13 Ethical considerations.....................................................................................................21
Refferences………………………………………………………………………………………22
 CHAPTER ONE
1.0 INTRODUCTION
This study looks at the the impact of financial literacy on students financial planning.
Furthermore. The other areas discussed in this section are the background of the study, statement
of the problem, purpose of the study, objectives, study questions, significance of the study,
limitations of the study and delimitations of the study. Operational definitions will also be given
in this section so that the study is easily understood.

According to Paul Goebel (2007), financial literacy is defined as the end result of the financial
education process, so when students are financially literate they can make informed financial
decisions that can aid in improving their financial well-being. Financial literacy is about
empowering people to have a successful life, it gives financial tools to financially empower
individuals so that they can create a better financial life for themselves (OppLoans, 2020).

1.1 Background
Promoting financial education has increased in programs used by policymakers as well
as instructors who train in business social groups, organizations, and government
agencies. It is expected that consumers who have been financially trained should make
the best decisions for their families to increase their economic security and welfare.
Therefore, financial education is important not only to students and individual
households, but also equally to their societies. Financial behavior involves individuals’
approaches and attitudes toward money and how it is spent, saved, and invested. The
purpose of financial education is to equip people with knowledge which will enable
them to manage their finances and provide insights which empower a person or family
to achieve their financial goals. Financial management is a complex set of behaviors
and decisions with different importance and priorities, which are achieved according
to the needs of an individual or family, preferences, and skills. Individuals and families
can change their behaviors at different times and for different reasons.
A study done by De clerk in 2009 on the financial behaviors of colleague’s students highlighted
how most students in the university lack awareness of money management, income and savings,
and how they can equip themselves with knowledge to fight fraud and take charge of the
finances. Goldsmith (2005) observed that undergraduates have limits on financial literacy hence
an international instrument was used to assess relationship between financial literacy as well as
its related issues such as age, gender, programs of study and income level and how they have an
impact on the level of financial literacy.

The College Student Journal Impact Factor presented by Avard et al (2005) highlighted the
importance of demonstrating the significance of controlling ones financial behavior according to
class year and the impact of academic abilities to understand how financial literacy varies.

Furthermore, low levels of financial literacy have a negative impact and is of concern worldwide
among university students, specifically final year students at Evelyn Hone College, because they
are closer to graduating and to going out of school premises to join the complex world with
regards to financial upkeep and responsibility. University graduate face the pressure of dealing
with the requirement of being as financially self-reliant and self-sustainable as possible (Klopper,
Lusardi & Van Oudheusden, 2018).

For instance, without having financial knowledge, Evelyn Hone College student can be prone to
overspending and over debtness because they have limited knowledge on how best to budget.
Over debtness occurs when a person already in debt incurs more debt in order to cover current
expenses such as funding of their extra education, graduation preparations. Students spend on
various items such as food, clothes, rent, entertainment, toiletries, alcohol and cosmetics. This
shows that students are making financial decisions every day. Having knowledge on financial
literacy increase the ability to make sound decisions without overspending.

Therefore, this study aims to analyze the impact of financial literacy on students financial
planning

1.2 Problem statement

A catastrophic financial well-being is characterized by consequences to do with lack of financial
literacy. According to McKay and Kempson (2003) the major concern that seemed to be
exhibited by most college students with low levels of financial literacy is overspending.

Then in turn these habits end up giving birth or breeding other implications in the areas of
someone financial well-being, such as investment and savings.
Although various studies on financial literacy have been done. The problem still exists as it is
still not clear as to what levels final year students are on at the Evelyn Hone College in terms of
financial literacy.

1.3 Justification of the Study

This study is important because it will determine the impact of financial literacy on students
financial planning at Evelyn hone college in Lusaka, The study also hoped to inform the relevant
government ministries such as the Ministry of Higher Education, Ministry of Education for
instance, on the its findings. Its hoped that by informing these ministries, and other stakeholders,
specific target oriented policies, relevant to the Ministry or bordering Departments, would be
formulated to respond to impact of financial literacy on students financial planning.

1.4 Main Objective

The general objective of the study was to analyze the impact of financial literacy on students

financial planning at Evelyn Hone College.

1.4.1 Specific Objectives

1. To determine the levels of financial knowledge among students.
2. To examine the factors influencing the level of financial literacy among university
Students
3. To assess challenges affecting students financial well-being.

1.5 Main research question

What the impact of financial literacy on students financial planning?

1.6 Significance Of The Study

The research study aimed at illuminating the factors that impact financial literacy so that future
researches can use the information to detect students who are at different levels of financial
literacy. Additionally, it can be used as an opportunity or way to establish collective financial
literacy programs at Evelyn Hone College. Furthermore, the body of knowledge has led to
continued research on the university student’s populace by providing a reference point to our
researchers. The research further made practical suggestions that provided solutions to the
institution on the importance of being financial literate.
1.7 Delimitation of the Study
In order to overcome the limitations researcher required people who were well known to that
area and sought their consent before the research this helped data collection process also took a
time to build trust to a respondents. Also the researcher had to use interactive tools before data
collection in order to establish rapports with the children such as bought juice, sweets and
biscuits.
In order to overcome the problem financial constrain, researcher minimized other expenses and
utilized the amount which was available to conduct the study. Lastly In order to make the study
successful the researcher visited the respondents at their own convenience especially in the
weekends when the respondents were free in order to accomplish the study as per respondent’s
time schedules also made appointments on their free time.

1.8 Limitations
The major limitation in this study was the lack of readily available materials. This therefore
means that the research focused only on the few literature available and the information provided
by the respondents than desired, thus leaving out a huge chunk of areas that would have yielded
more insight into the problem under study. Other constraints include, inadequate funding.
Nonetheless, the methodologies employed were so designed to ensure that the research yields the
best possible results with these constraints.

1.9 Definition Of Concepts

For the purpose of this study, the following key terms are used and defined below:
Financial literacy: Financial literacy is defined as the end result of the financial education
process,so when students are financially literate they can make informed financial decisions that
can aid in improving their financial well-being (Goebel,2007).
Finances: It is the art and science of managing money. It is concerned with the process
institutions, markets and instruments involved in the transfer of money among and between
individuals, businesses and governments (Gerkman, 2003).
 CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
The current chapter will review literature on impact of financial literacy on students financial
planning. The chapter will also review empirical literature on the levels of financial knowledge
among students, factors influencing the level of financial literacy among university students and
challenges affecting students financial well-being.

2.2 Students understanding of financial literacy

Financial literacy offers benefits not only when someone has made a decision about investing
their money. Given the alternatives available for investment. For example, bonds, stocks or
mutual funds, but it also makes simple daily financial judgments like developing their household
budget which could be planning the monthly income and budget for paying electricity, gas,
water, telephone, food, or considering buying new luxuries along with assessing the ability to
pay the interest on bank loans. According to Chen and Volpe (2000) who analyzed personal
financial literacy among 14 universities, it was found that knowledge of personal finance,
general financial knowledge, and savings, borrowing insurance or investments was generally
poor among USA University students.

Chen, Volpe and Parvlico (1996) surveyed 454 undergraduate business students from only one
university using an instrument of 23 items that focus primarily on investment knowledge. They
all concluded with similar overall findings to previous studies showing that students achieving a
low average literacy with those who major in business being knowledgeable of investments than
those who did not major in business.

Money Management Practices of College Students, a study by Henry et al. (2001), included an
undertaking of a survey of 126 undergraduate education majors at the University of Louisiana at
Lafayette using a 13-item questionnaire on debt, income and budgeting practices. It was then
established that the majority of the students do not have or use a written budget. Among the
people who took part, ladies, married students, and older students were likely to follow their
budgets.
Markovich and DeVaney (1997) equally surveyed 236 randomly selected undergraduate seniors
from Purdue University to measure financial knowledge and behavior using a questionnaire.
Although their study included financial behavior, they only measured the level of students’
knowledge impacted or correlated behavior. They similarly found was that the overall financial
knowledge of seniors is low and that there was little difference between the universities majors
represented, although business do have the highest knowledge scores. They also suggest that
students believe they themselves should take a personal finance course and that taking a course
will help them financially.

2.3 Investments
Investments is the commitment of money or capital to purchase financial instruments of other
assets in order to gain profitable returns in the form interest, income or appreciation of the value
of the instruments.
This involves the choice by an individual or an organization such as a pension fund. An
investment involves the choice by an individual or an organization such as a pension fund, after
some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as
property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign
asset denominated in foreign currency that has certain level of risk and provides the possibility of
generating returns over a period of time (Beal & Delpachitra, 2003).

Recently, high school curriculum takes less consideration upon the effectiveness of using the
income in dealing with financial matter such as bank accounts, investments, mutual funds,
mortgages, credit cards, loans, insurance and taxes. Nag (2007) presents arguments to emphasize
that young people cannot borrow and thus do not have wealth to invest in stocks. However, there
are a large number of those with a university degree that does not participate in the stock market.
Besides that, the researcher found out that stock market participation increases with age, and
normally stock’s ownership is focused on those in 40 years old and older.

Prior research of various researchers has shown that students are not receiving sound education
on financial investments and as a result have inadequate knowledge on investing. This realization
indicates that there is a low level of understanding concerning financial concepts dealing with
investing, saving, borrowing, inflation, and risk diversification (Chen & Volpe, 1998; Lusardi &
Mitchell 2006, 2007; Lusardi, Mitchell, & Curto, 2009; Lusardi & Tufano 2009; Rooij et al.,
2007).

2.4 Financial behaviour

This is the ability to capture of understanding overall impacts of financial decisions on
one’s (ie personal, family, community, country) circumstances and to make the right
decisions related to the cash management, precautions and opportunities for budget
planning.

According to John Sevacqua, understanding your financial behaviour is a critically

important factor to consider when crafting an income plan. For example, if
you are inclined to move your investment portfolio towards more conservative
investments if you realised losses, you should, consider (A) staying away from risky
investments. (B) planning on spending less, and (C) buying insurance that provides a
safety net.

2.5 Financial knowledge

Financial awareness and understanding about the financial concept and procedures as
well as the use of this understanding to solve financial problems. Strong financial
knowledge and decision-making skills help people weigh options and make informed
choices for their financial situations, such as deciding how and when to save and spend,
comparing costs before a big purchase, and planning for retirement or other long-term
savings.

If there’s one thing we can all be certain of in life, it’s having to adapt to change. As
Grammy- winning Singer and entrepreneur Jimmy Dean once put it, “I can’t change
the direction of the wind, but I can adjust sails to always reach my destination.”
While you may need to quickly adjust your financial” Sails” occasionally to respond
to unexpected life changes, there are many other events that you can prepare for in
advance to make future course corrections much easier.
2.6 College major

The student’s major courses studies in university are one of the element indicators for academic
courses which significantly impact on their knowledge to personal financial literacy. It was
discovered that there was a relationship between financial courses taken in college and students’
knowledge of investment (Peng et al, 2007). Beal and Delpachitra (2003), Chen & Volpe (1998),
Volpe, Chen, & Pavlicko (1996), Peng et al. (2007), and Robb & Sharpe (2009) all conclusively
established that business majors are more knowledge about personal finance than non-business
majors. Their findings all showed how educational background made an impact on the average
financial knowledge score, with business majors and students with higher class rank scoring
bettermon the test of financial knowledge particularly with regards to finance and accounting.
Other findings of their studies shows equal support towards the conclusion that students with
higher interest in financial matters, a greater level of directed reading and more consistent
listening to financial reports on the media show a better score in the test of financial literacy
levels.
As university students take on higher levels of personal financial responsibility, their interest in
personal finances intensifies and learning slowly but surely takes place. It is also more likely that
university students are experiencing more challenges with finances as they save, budget monthly
expenses, and manage student debt after they graduate. As suggested by Peng (2007), increased
financial pressure and financial challenges faced in conjunction with relevant instruction may
result into the learning process of what encompasses financial literacy being enhanced.
2.7 Gender

There are few researches carried out to test on the difference between the gender and their
financial literacy. These include Chen & Volpe (1998), Danes & Haberman (2007), Manton et al.
(2006), Micomonaco (2003), Peng et al. (2007) and Volpe et al. (1996), who found out that male
students scored better in the financial knowledge test as compared to the female counterparts.
However, there is also a different finding in which Ibrahim et al. (2009) found out that there is no
difference between the level of financial knowledge between males and female students. These
disparities that have arisen from the findings of different studies have made it hard to
conclusively ascertain the level of influence gender has on financial literacy decisions.
 CHAPTER THREE
METHODOLOGY
3.1 Introduction
The current chapter will present the methodology to be adopted by the study. This chapter will
also present the research methodology, research design, types of data to be collected, the study
site, the target population, sample size, sampling procedure or method, data collecting tools, data
analysis and the chapter concludes by outlining the ethical considerations to be followed by the
study.

3.2 Research methodology

The current study is classified under exploratory research approach because the study will
establish the factors contributing to financial literacy on students financial planning.

3.3 Research design

Quantitative research is the process of investigating and explaining different concepts and
theories based on variables and drawing results in the form of numeric data by applying different
statistical operations, (Saunders et al, 2012).The study will adopt quantitative research design.
Quantitative research approach will be used in this research because quantitative research is
conclusive in its purpose, as it tries to quantify a problem and understand how prevalent it is by
looking for projectable results to a population of interest to the researcher.

3.4. Study Design

This study will be a cross sectional observational study that will be conducted in some of the
Urban areas, aimed at determining the factors that lead to financial literacy.

3.5 Types of data to be collected

The study will use only use primary data and this will be obtained from questionnaires that will
be distributed to respondents.
3.6 Study site
The study will be conducted at Evelyn Hone College in Lusaka district, Zambia. The institution
is situated at 150 South Latitude,280 East Longitude and 1,277metres elevation above the sea
level.

The population of the institution is estimated at 7, 00 people of which 49.4% are males and
50.6% are females.

3.7 Target population

The target population is (1000) students at Evelyn Hone College in Lusaka district.

3.8 Sample size

The sample size was determined using Yamane's sample size formulae for as follows:

N
n=
¿¿

Where n = sample size, N= population e= level of significance (0.05)

1000
n=
¿¿

n=285.71=286

Therefore, this study will have sample size of 286 respondents

3.9 Sampling techniques

The study will use probability sampling technique(random sampling) From probability purpose
sampling technique random sampling will be used to select respondentsin the study area
without any bias and giving the respondents equal chances of being selected to be part of the
study.

3.10 Sampling procedures

The sampling procedures provide the basis upon which the sample for the study was selected.
The study focused on Evelyn hone students. The study was undertaken to establish factors that
influence alcohol abuse among students at Evelyn Hone College in Lusaka urban. Field work
was conducted in Lusaka, at Evelyn Hone College.
Both convenient and purposive sampling were used to select the four (4) students from which the
sample was selected. Simple random sampling method was used to select students following
simple procedure as presented in Cohen et.al (2002).

3.11 Data Collection

Data collection was carried out over a period of three (3) weeks starting from the second week of
August to the last week of August, 2022. Self-administered questionnaires were used to get the
views of a representative population of students. The focus group discussions (FGDs) provided a
more interactive study of views, where reasons for views were elaborated at length. The
researcher administered 180 questionnaires, 4 focus group discussions (6 students per discussion)
and 8 interviews.
A questionnaire, four focus group discussions and eight in-depth interviews were used to collect
data. Focus group discussions and in depth interviews were used to collect qualitative data while
questionnaires were used to collect quantitative data.
1.12 Data collection tools
The researcher made use of multiple research instruments when collecting date for this study
(Triangulation) so that the instruments can complement one another. The purpose of using the
triangulation approach was to avoid creating limitations and biases that about as the result of
using just one research tool. The researcher collected primary data using three data collection
tools namely; self-administered questionnaires (appendix i), in depth interview guide (appendix
ii) focus group discussion (appendix iii).

3.7.1 Questionnaire
A questionnaire stands out as a versatile tool for both qualitative and qualitative data and
facilitates data collection from a large number of respondents within a short period of time
(Bless, 2003). The questionnaire was used to collect quantitative data and it helped obtain a cross
section perspective of the problem at hand. The researcher structured the questions in the
questionnaire specific to the situation and no personal identification marks were put and
confidentiality was assured.

3.7.2 In-depth interviews

An in-depth interview provides a platform where the researcher is able to have a one to one
interview with a respondent and observe non-verbal behavior and legitimacy of the respondent
being interviewed (White, 2003). The researcher used an in-depth interview guide to interview 4
head teachers and 4 guidance and counselling teachers so as to get in-depth information on the
factors contributing to alcohol abuse among school boys and girls in Lusaka Urban.

3.12 Inclusion criteria

In the current study, students who have been students at the institution for a continuous period of
not less than 2years will be included in the study.

3.13 Exclusion criteria

Non students of Evelyn Hone College and those in the area for less than 2years will not be
excluded from the study.

3.14 Ethical considerations

Ethical clearance from the Research and Ethical Committee of the Unversity of zambia was
sought and a written permission from lusaka city council was obtained to start data collection.
Verbal consent will also be sought from the head of households. Anonymity, confidentiality and
privacy will be upheld during and after carrying out the research by not indicating names of
individuals who are owners of households that participated in the study.

3.15 Data analysis

Data collected (primary data)fromthe questionnaires issued will be analysed using
SPSS(statistical package for social science) version 25. Frequency tables and figures will be for
representing the demographic data. Chi-square and regression analysis are the statistical methods
that were used to analyse the data. Regression analysis will be used to measure the effect of the
independent variable on the dependent variable.Chi-square will used for the purpose of
answering the research hypotheses statements and objectives of the study.
REFERENCES
Aggarwalla, S. K., Barsa, S. K., and Varma, J. Financial Literacy among Working Young in
Urban India, pp (1-27) W. P No. 2013-10-02
Agarwal, S., Amromin, G., Ben-David, I., Chomsisengpet, S., Evanoff, D. D., Financial Literacy
and Financial Planning: Evidence from India (December 20, 2010).
Available at SSRN: http://ssrn.com/abstract=1728831 or http://dx.doi.org/10.2139/ssrn.1728831
Atkinson, A, McKay, D., Collard, S & Kempson, E. (2007). Levels of financial capability in the
UK public money and management, 27 (1), 29-36.
Bashir, T., Arshad A., Nazir, A., and Afzal, N. (2013). Financial literacy and influence of
psychological factors Eur. Sci. J. 9 384-404
Aliaga, M. & Gunderson, B. (2002) Interactive Statistics. New Jersey: Prentice Hall. Avard, S.,
Manton, E., English, D., & Walker, J. (2005). The financial knowledge of college freshmen.
College Student Journal, 39(2), 321-338.
Beal, D. J., & Delpachitra, S. B. (2003). Financial literacy among Australian university students.
Economic Papers, 22(1), 15. Retrieved from
http://ezproxy.upm.edu.my:2063/ehost/pdfviewer/pdfviewer?hid=8&sid=f74751f1-38ce-4d93
b42d e7e2b4fc2c12%40sessionmgr12&vid=4
Bandura, A. (1997). Social learning theory. Englewood Cliffs, NJ: Prentice-Hall.
Bernadene de clerk (2009). Personal financial management: The southern African guide to
personal financial planning, Claremont: juta.
Bryman, A (2001). Social Research Methods. Oxford University Press, Oxford. Chen, H., &
Volpe, R. P. (1998). An analysis of personal financial literacy among college students Financial
Services Review, 7(2), 22. Retrieved from
http://www2.stetson.edu/fsr/abstracts/vol_7_num2_107.pdf.

Chen, H., & Volpe, R.P. (2002). Gender differences in personal financial knowledge among
college students. Financial Services Review, 11, 289-307.
Danes, S. M., & Haberman, H. R. (2007). Teen financial knowledge, self-efficacy, and behavior:
a gendered view. Financial Counseling and Planning, 18(2), 13. Retrieved from
https://www1067.ssldomain.com/afcpe/doc/7%202866%20Volume%2018%20Issue%202.pdf.
Danes, S. M., Huddleston-Casas, C., & Boyce, L. (1999). Financial planning curriculum for
teens: impact evaluation. Financial Counseling and Planning, 10(1), 14. Retrieved from
https://www1067.ssldomain.com/afcpe/doc/Vol1013.pdf
Bruggen, E. C., Hogreve, J., Holmund, M., Kabadyi, S., & Lofgren, M. (2017). Financial
wellbeing: A conceptualization and research agenda, Journal of Business Research, 79, (C), 228
237
Goldsmith R.E & Goldsmith E. B. (1997). Gender Difference in finance and Real knowledge of
Financial Investments. Journal of Psychological reports, 286-288
Gutter, M.S., Garrison, S., & Copur, Z. (2010). Social learning opportunities and the financial
behaviors of college students. Family and Consumer Sciences Research.
Hayhoe, C., Leach, L., Turner, P., Bruin, M., & Lawrence, F. (2000). Differences in spending
habits and credit use pf college students. Journal of Consumer Affairs, 34, 113-133.
Henry, R. A., Weber, J. G., & Yarbrough, D. (2001). Money management practices of college
students. College Student Journal 35(1), 6. Retrieved from
http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=5010948&site=ehostlive&sco
pe=site
Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The
connection between knowledge and behavior. Federal Reserve Bulletin, 309-322.
Holga Kelly (2002), Personal Investment Literacy among College Students: A Survey. Financial
Practice and Education 6(2), 86-94
http://www.cluteinstitute-onlinejournals.com/PDFs/200644.pdf